Senator Cortez Masto: 2021 Franchise Report & Discussion

In April, 2021, Senator Catherine Cortez Masto put many of the issues reported for years by UnhappyFranchisee in the national spotlight. Download, read and discuss this important franchise report in this post and on related pages.

(UnhappyFranchisee.Com)
With the help of many colleagues and friends of fair franchising & UnhappyFranchisee (including current and former franchisees), Catherine Cortez Masto and her staff issued an 87-page report entitled “Strategies to Improve the Franchise Model: Preventing Unfair and Deceptive Franchise Practices.”

We hope to start a wide and impactful conversation on the vitally important topics in this report.

Download the Entire Report Here: 2021 Franchise Report by Senator Cortez Masto

2021 Franchise Report Summaries, Discussions & Supplemental Case Studies

As always, those who benefit from the status quo and reap benefits from predatory and exploitive franchise practices are already deploying their well-funded spin doctors and lobbyists to misinfom and argue against fair practices.

However, change is possible if you let your voice be heard.

Share your opinions and experiences in the comment section of any page.

If you are willing to share via an interview, (named or anonymous), please contact publisher Sean Kelly (in confidence) at UnhappyFranchisee[at]gmail.com

Check back often, as we will be adding links and content below weekly, if not daily.

2021 Franchise Report Discussion by Section

Table of Contents

I. Executive Summary – p. 3

II. Overview of the Franchise Sector – p. 6

a. Chart 1: Net Growth in the Franchise Sector Is Small – p. 7

b. What Are the Risks in Franchise Ownership? – p. 8

III. Government Oversight of Franchises Is Inadequate – p. 8

a. The Role of the Federal Trade Commission – p. 9

i. The Federal Trade Commission’s Franchise Rule – p. 10

ii. The Federal Trade Commission’s Comment Periods on the Franchise Rule p. 11

b. The Role of the Small Business Administration – p. 11

i. Chart 2: Proportion of 7(a) and 504 Loans Made to Franchises by Fiscal Year – p. 14

ii. Chart 3: Proportion of 7(a) and 504 Loan Funds Made to Franchises by Fiscal Year – p. 13

iii. Chart 4: Some Franchise Brands Experience High Defaults – p. 1

iv. Chart 5: Top Franchise Defaulters – p. 14

v. Chart 6: Loans Issued to Selected Franchises – p. 15

vi. Chart 7: Dollars Charged off by Selected Franchises – p. 15

vii. Chart 8: Charge-off Rates of Selected Franchises – p. 16

viii. Chart 9: Data on SBA Loans to Selected Franchises – p. 17

ix. The Small Business Administration Received Decades of Warning

IV. Case Studies – p. 18

a. Franchise Models That Work: Popeye’s, Dunkin and Fast Signs – p. 18

b. Franchise Models With a History of Owner Complaints – p. 19

i. Burgerim – p. 19

ii. Complete Nutrition – p. 20

iii. Dickey’s Barbecue Pit – p. 21

[UnhappyFranchisee Posts on Dickey’s Barbecue Pit franchise]

iv. Experimac/Experimax – p. 22

[UnhappyFranchisee Posts on Experimac / Experimax & United Franchise Group franchise]

v. Subway – p. 23

[UnhappyFranchisee Posts on the Subway franchise]

vi. Curves – p. 24

[UnhappyFranchisee Posts on the Curves franchise]

vii. 7-Eleven – p. 25

[UnhappyFranchisee Posts on the 7-Eleven franchise]

[Sean Kelly interview in Australia’s 7-Eleven Four Corners expose]

viii. Huntington Learning Centers – p. 26

[UnhappyFranchisee Posts on the Huntington Learning Centers franchise]

ix. Quiznos – p. 27

[UnhappyFranchisee Posts on the Quiznos franchise]

x. Massage Envy – p. 27

[UnhappyFranchisee Posts on the Massage Envy franchise]

V. Four Factors Leading to Franchise Failures – p. 28

a. Unfair Franchise Agreements Allow Franchise Corporations to Retain Excessive Control – p. 29

b. Missing or Misleading Financial Disclosures – p. 31

c. Overpriced Fees and Missing Services – p. 33

d. Requirements to buy from preferred vendors and resulting kickbacks– p. 34

VI. Solutions: Establish Fair Franchise Practices – p. 35

a. What Franchise Corporations Should Do – p. 35

b. What Can Congress Do? – p. 35

c. What Can the Federal Trade Commission Do? – p. 37

d. What Can the Small Business Administration Do?– p. 39

e. What Can States Do? – p. 40

f. Chart 10: Franchise Registration States – 40

VII. Conclusion – p. 41

VIII. Special Thanks – p. 41

IX. End Notes – p. 42

X. Appendix I – p. 56

a. Comments to the Federal Trade Commission Regarding Franchise Regulation

XI. Appendix II – p. 71

a. Letters to/from Small Business Administration

Special recognition: In addition to Cortez Masto & her staff and the FTC’s Rohit Chopra, special recognition is due to Keith Miller (Franchise Advocacy Group), Jeff Lefler (Franchise Grade), Jonathan Fortman (Fortmen Law), Robert Spada (former Huntington Learning franchisee), state franchise regulators (especially Virginia, California, & Washington), Jonathan Maze (Restaurant Business), Dale Cantone (Assistant Attorney General, State of Maryland), Sean Kelly (UnhappyFranchisee), Brandon Moore (former Dental Fix franchisee), the dedicated franchisee attorneys and the thousands of franchisees who have shared their experiences (anonymously) on UnhappyFranchisee and elsewhere and refused to be silenced. Dedicated to the memory and family of Bob Baber, Quiznos franchisee. Who else? Recognize others in the comment section below.

WHAT DO YOU THINK? SHARE A COMMENT BELOW.

Contact UnhappyFranchisee.com

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View Comments

Keith Miller says:

May 4, 2021 at 11:10 pm

There are a couple actions franchisees reading this should take. First, thank Senator Cortez Masto and her staff for producing this comprehensive report. And tell her your franchise story. If you think your franchise should be added to the problematic list, let her know. If you have a great brand, let her know that too. Send an email to Carol_Wayman@cortezmasto.senate.gov.

The second thing you need to do is get your Senators to support and cosponsor S.1120, the SBA Franchise Loan Transparency Act. This is the legislation that requires certain disclosures in the FDD for brands receiving SBA loans. Simply put, it provides more transparency in the disclosure process. Go to https://www.senate.gov/senators/index.htm to find your Senator. On their website there will be a contact section. Use that to ask for them to cosponsor S.1120. Tell them you are a franchisee in their state and you support increased disclosure requirements for SBA lending. Tell as much of your story as you want.

These are actions you can take to make a difference in the franchise industry. Don’t complain, take action.

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Senator Cortez Masto: 2021 Franchise Report & Discussion

2021 Franchise Report Summaries, Discussions & Supplemental Case Studies

2021 Franchise Report Discussion by Section

I. Executive Summary – p. 3

II. Overview of the Franchise Sector – p. 6

a. Chart 1: Net Growth in the Franchise Sector Is Small – p. 7

b. What Are the Risks in Franchise Ownership? – p. 8

III. Government Oversight of Franchises Is Inadequate – p. 8

a. The Role of the Federal Trade Commission – p. 9

i. The Federal Trade Commission’s Franchise Rule – p. 10

ii. The Federal Trade Commission’s Comment Periods on the Franchise Rule p. 11

b. The Role of the Small Business Administration – p. 11

i. Chart 2: Proportion of 7(a) and 504 Loans Made to Franchises by Fiscal Year – p. 14

ii. Chart 3: Proportion of 7(a) and 504 Loan Funds Made to Franchises by Fiscal Year – p. 13

iii. Chart 4: Some Franchise Brands Experience High Defaults – p. 1

iv. Chart 5: Top Franchise Defaulters – p. 14

v. Chart 6: Loans Issued to Selected Franchises – p. 15

vi. Chart 7: Dollars Charged off by Selected Franchises – p. 15

vii. Chart 8: Charge-off Rates of Selected Franchises – p. 16

viii. Chart 9: Data on SBA Loans to Selected Franchises – p. 17

ix. The Small Business Administration Received Decades of Warning

IV. Case Studies – p. 18

a. Franchise Models That Work: Popeye’s, Dunkin and Fast Signs – p. 18

b. Franchise Models With a History of Owner Complaints – p. 19

i. Burgerim – p. 19

ii. Complete Nutrition – p. 20

iii. Dickey’s Barbecue Pit – p. 21

iv. Experimac/Experimax – p. 22

v. Subway – p. 23

vi. Curves – p. 24

vii. 7-Eleven – p. 25

viii. Huntington Learning Centers – p. 26

ix. Quiznos – p. 27

x. Massage Envy – p. 27

V. Four Factors Leading to Franchise Failures – p. 28

a. Unfair Franchise Agreements Allow Franchise Corporations to Retain Excessive Control – p. 29

b. Missing or Misleading Financial Disclosures – p. 31

c. Overpriced Fees and Missing Services – p. 33

d. Requirements to buy from preferred vendors and resulting kickbacks– p. 34

VI. Solutions: Establish Fair Franchise Practices – p. 35

a. What Franchise Corporations Should Do – p. 35

b. What Can Congress Do? – p. 35

c. What Can the Federal Trade Commission Do? – p. 37

d. What Can the Small Business Administration Do?– p. 39

e. What Can States Do? – p. 40

f. Chart 10: Franchise Registration States – 40

VII. Conclusion – p. 41

VIII. Special Thanks – p. 41

IX. End Notes – p. 42

X. Appendix I – p. 56

a. Comments to the Federal Trade Commission Regarding Franchise Regulation

XI. Appendix II – p. 71

a. Letters to/from Small Business Administration

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